J.P. Morgan has upgraded Punjab National Bank (PNB) from a long standing 'underweight' to 'overweight' stance. The brokerage has also raised the target price on the stock to Rs 72 and sees an upside of over 26 percent from current market price.
According to J.P. Morgan , the bank's Q2 shows that net slippages have got into negative territory and recovery momentum is outpacing new non-performing loan (NPL) creation. Also, there is minimal stress in corporate loans. Provisions hence are largely related to back book (net NPL 3.8 percent, restructured 1.7 percent) which are higher than State Bank of India and Bank of Baroda and the market will likely look through it via a one-time book value adjustment, it said.
Also read: Top 10 trading ideas by experts for next 3-4 weeks
"Capital and liquidity is reasonably comfortable with Common Equity Tier 1 capital (CET-1) at 10.9 percent and Liquidity Coverage Ratio (LCR) at 160 percent in an environment of tighter deposits at private banks. The stock has seen a re-rating led outperformance recently (+44 percent in 3-month against Bank Nifty of +8 percent) and we believe that, with limited new stress formation and system growth outlook improving, this trend could continue in the near term," the brokerage added.
Catch all the market action on our live blog
At 11:05 hrs Punjab National Bank was quoting at Rs 57.35, up Rs 1.10, or 1.96 percent on BSE. It has touched an intraday high of Rs 58.00 and an intraday low of Rs 56.25.
However, J.P. Morgan analysts estimate earnings to remain under pressure in F23/24 as the company catches up on back book provisioning. This keeps F24 estimate broadly unchanged. However, with limited new stress formation and system growth itself picking up, it sees further scope of re-rating at PNB, the research note said.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
